Royal Liver Group

Highlights

- Successful start to the year reflects continued benefits of growth strategy;

- Expenses contained for the best first half performance in recent years;

- Clear focus on managing expenses and new product growth;

- Strengthened balance sheet and enhanced capital position;

- New business premiums ahead of budget;

- Strong performance from Progress and Caledonian, our leading protection products businesses;

- Park Row investment and restructuring underpins growth prospects;

- Citadel maiden first half contribution;

Commenting on the interim results, Steve Burnett, Chief Executive of Royal Liver Assurance said:

"The excellent performance in the first half is testimony to the strategy we are pursuing with a clear focus on managing expenses and new product growth. We are now seeing good momentum with our four new customer facing brands whilst we manage our legacy with profits business efficiently. Despite a favourable first half we cannot afford to be complacent and must constantly review our success against an ever changing market place to ensure that Royal Liver remains a strong and relevant participant in today’s fast moving financial services market. We embrace that challenge and move forward with confidence."

For further information:

HeadLand Consultancy
Tel: 0207 367 5222
Chris Salt/Laura Hickman

Royal Liver Assurance
Cara Newton
ExTel: 0151 600 4264

Chief Executive’s Review

Results Overview

I am pleased to report a strong performance in the first half with further improvements in the operating performance of the Group as we see the continued benefits of the modernisation strategy we embarked on three years ago.

In order to put our progress in context it is helpful to look back at where we were and how far we have come. Three years ago we were faced with a number of challenges. Our expenses were too high and we needed to accelerate the process of cost reduction. Our product strategy was outdated and needed focus and our costs of distribution were high. Some hard decisions were taken but these were essential in order to better protect and enhance the interests of our 1.7 million Members.

Although challenges remain, actions taken have put the Society in a much stronger position and we have made solid progress. In addition to significant progress on cost control and new product development, we have strengthened the balance sheet and our capital position is enhanced. We are driving new business growth through new product development and the UK and Republic of Ireland (“ROI”) distribution over-runs have been substantially reduced.

Managing expenses remains a top priority and further good progress has been made in the first half with operating expenses down 27% on 2006. At Group level our expense overrun has been contained to close to £0.4m, the best first half year performance in recent years continuing a positive trend. In 2002, the expense overrun was £28m falling to £8 in 2006. Operating expenditure for the Society continued to fall and was better than budget in the first half reaching £23.6m compared to £28.5m in 2006 and £34.2m in 2005. Whilst the story is good in terms of our achievements in managing costs to date, we cannot afford to be complacent and this will continue to be a very real challenge for us going forward.

The first half also saw the approach from Royal London. This was a significant development in the Society’s 157 year history and put our strategy and progress in the spotlight. We had a duty to our members to examine carefully Royal London’s proposal. The strong determination by the Board that our current strategy was the choice which was in the best interests of our members come with a strong vote of confidence in management’s ability to implement that strategy.

These strong results would not have been possible without the hard work and commitment of all our staff . During the half year, I am pleased to report recognition in the shape of a number of awards across our business and we were also awarded Investors in People status.

Key Business Units:

All areas of the business had a good first half and were on track or ahead of budget, apart from Park Row which, as highlighted at the time of our full year results, is part way through its turnaround programme and is seeing the impact of difficult market conditions and the effects of the integration of the managed sales force.

Manufacturing and Operations
Our Manufacturing and Operations businesses, Progress and Caledonian, performed strongly delivering a surplus of income over expenses for the first time in the last five years.

Progress, our e only protection service, continues to increase its incoming business levels, and its profile in the UK market place. The number of Independent Financial Advisers using Progress continues to grow in line with targets, with major improvements made to our adviser website, which now offers a tailored experience to advisers based on the depth of their relationship with us. The service was awarded the maximum five stars in the FT Business Online Service Awards in June 2007.

In ROI, Caledonian had another successful start to the year building on With Profit Bond sales, making it one of Ireland's best selling investment products. Protection sales, despite a slowdown in the Irish mortgage market, continue to perform very robustly. Finally, Caledonian Life performed very strongly in the annual Broker service Awards achieving seven first places in individual categories in the IBA Service Awards.

Distribution
In line with most other UK National IFA distribution businesses, this has been a challenging year to date for Park Row. Regulatory reviews and the ever increasing cost of compliance are having a huge impact in the IFA distribution sector. Park Row also experienced increased central costs following the integration of the managed sales force in the second quarter of 2006. Despite these challenges, the business continues to win awards, with the Corporate and Private Clients activity winning ‘IFA of the Year’ for a third consecutive year in 2007. Park Row is going through a period of restructuring and investment which will position the business strongly for the future and I am confident that the management team will return the business to profit during the next few years.

Citadel, our Republic of Ireland distribution business was launched in October 2006. This first half marks the first full six month contribution and it performed better than expectations. The outlook for the second half of the year is positive as the Citadel name becomes more established in the Irish market.

Royal Liver Asset Management (“RLAM”) had an encouraging six months. Funds under management at the half year stood at £1.4bn. RLAM is now well set to increase the number of sub-funds that it operates and to look at additional sources of income from either retail or institutional investors.

Outlook

We started 2007 in much better shape. The consideration of a potential merger with Royal London is now behind us. Our status as a mutual company is something of which we are proud and we now move forward with confidence building on the progress of recent years and focused on the challenges and opportunities ahead.

Notes to Editors
2007 Interim Results
Royal Liver Assurance Limited is an incorporated Friendly Society founded in Liverpool in 1850 for the mutual benefit and financial security of local families. The principal activity of the Society is the transaction of long-term insurance business covering life and pensions in the United Kingdom and Republic of Ireland.

Key facts
3.4 million policies
1.7 million members
£3.7bn assets under management as at 31 December 2006
Member of the Association of Mutual Insurers (AMI)

Key Business Areas

Royal Liver Group encompasses five main business areas, four of which undertake customer-facing ‘distribution’ and ‘manufacturing’ functions in the UK and ROI.

Royal Liver Assurance exists to service and maintain Royal Liver policies with a focus on delivering value back to policyholders.

Park Row is one of the largest and fastest growing financial advice companies providing financial planning for individuals and businesses alike. Acquired in 2003, it acts as Royal Liver’s distribution arm in the UK. www.parkrow.co.uk

Progress is an online-only manufacturer and provider of protection products for IFAs, including Life, Income and Critical Illness Cover. Introduced in 2004, the award winning businesss enjoyed strong growth. www.ifa.royal-liver.com

Caledonian Life was formed in 2001 having held the Caledonian name for nearly 200 years in ROI. It manufactures and provides products such as mortgage and life cover, as well as bond investments. www.caledonianlife.ie

Citadel is Royal Liver’s broker business in ROI offering IFA advice. Launched in October 2006, it has quickly become a key provider of independent financial advice. www.citadel-fa.ie

The Delegation
The Society has had a delegation system since 1886 whereby the Members of Royal Liver elect fellow Members to act as the sole representative body. Today there are 220 delegates and they are authorised to take decisions on behalf of the Membership at General Meetings of the Society.

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For more information please contact Richard Edwards at Royal Liver Group on +44 (0)151 600 4268.